Telkom South Africa’s Media Plans On Hold As It Awaits Clarity

Mergers, Acquisitions and Financial Results

Telkom digital media business Telkom Media had to suspend some plans until there was clarity on its shareholding structure, Telkom Media spokesman Chris van Zyl said on Friday.

He could not comment on changes to Telkom Media's shareholding at this stage. Telkom owns 66% of Telkom Media, and wants to reduce or sell the entire stake. Shareholders include Videovision Home Entertainment (15%), WDB Investments (5%), MSG Afrika (5%) and staff (4% through an incentive scheme).

Van Zyl said Telkom was likely to disclose more on potential bidders for the stake at the June 9 announcement of its results for the year to March.

Nevertheless, some Telkom Media activities were continuing, such as building a broadcasting studio in Centurion. Two years ago, Telkom Media said it intended to broadcast a 24-hour news channel. Development was continuing, but Van Zyl could not say when the news service would start.

Telkom wants to reduce its shareholding as it has projects competing for funding and the payback period for Telkom Media was thought too long in relation to the payback of other Telkom projects. In addition, Telkom faced tougher competition, and a controlling stake in Telkom Media was not necessary to access media content.

Renaissance Specialist Fund Managers analyst Khulekani Dlamini said the sale of a stake in Telkom Media was "a difficult idea in itself" because Telkom Media's chances of success seemed "50-50", even if the R7,5bn capital spend expected from Telkom was taken into account.

He said finding a new shareholder would lengthen Telkom Media's time to market even further. The local pay-TV market would be hard to enter as it was well penetrated by the DStv platform.

Kaplan Equity Analysts MD Irnest Kaplan said he believed it would be better for Telkom to partner with a media content provider in Telkom Media as the fixed-line operator had bigger problems to deal with other than entering a new market. These included improving management, deciding what to do with its 50% Vodacom stake and fending off new fixed-line operator Neotel.

Telkom's money would be better spent improving its service and speeding up the broadband roll-out.

Business Day